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JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. This content downloaded from 146.; tUniversity of Pennsylvania. We gratefully acknowledge the comments of Bob Holthausen, Prem Jain, Rich Lambert, Bharat Sarath, Scott Stickel, and the workshop participants at Berkeley, Columbia, University of Michigan, University of Minnesota, M.I.T., Northwestern, University of Pittsburgh, University of Rochester, UCLA, Washington, and Yale. We also thank an anonymous referee for many helpful suggestions. 302 All use subject to JSTOR Terms and Conditions TRADING VOLUME AND PRICE REACTIONS 303 'Since traders have homogeneous beliefs, no trade occurs. 2 See Indjejikian [1991] for an extension of this idea. 'Other rational expectations models that employ a two-period trading structure include Brown and Jennings [1987] and Krishnan [1987]. 'We mentioned only those studies using Grossman-type rational expectations models. Studies which assume different market structures include Kyle [1985], Glosten and Milgrom [1985], Karpoff [1986], and Admati and Pfleiderer [1988]. Also, see Tauchen and Pitts [1983] and Karpoff [1987] for the relation between volume and price change not explicitly related to the arrival of new information and its properties, and Verrecchia [1981] for a discussion of what inferences can be drawn from volume.

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In this study we examine changes in the precision and the commonality of information contained in individual analysts' earnings forecasts, focusing on changes around earnings announcements. Using the empirical proxies suggested by the Barron et al. (1998) model that are based on the across-analyst correlation in forecast errors, we conclude that the commonality of information among active analysts decreases around earnings announcements. We also conclude that the idiosyncratic information contained in these individual analysts' forecasts increases immediately after earnings announcements, and that this increase is more significant as more analysts revise their forecasts. These results are consistent with theories positing that an important role of accounting disclosures is to trigger the generation of idiosyncratic information by elite information processors such as financial analysts (Kim and Verrecchia 1994, 1997).